Yuill v Fletcher
| Jurisdiction | England & Wales |
| Judgment Date | 15 April 1983 |
| Date | 15 April 1983 |
| Court | Chancery Division |
Chancery Division.
Mr. Leolin Price Q.C. and Mr. C.W. Koenigsberger (instructed by Messrs. Tilley, Bailey & Irvine) for the taxpayer.
Mr. D.C. Potter Q.C. and Mr. C.H. McCall (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: Walton J.
Income tax - Artificial transactions in land - Gains from land sales by Guernsey companies - Taxpayer providing the opportunity of realising those gains - Basis for valuing gains - Bulk of purchase price deposited with third party and subject to forfeiture in certain circumstances - Whether gain to be calculated on amount received in tax year - Whether sale for money or money's worth - Income and Corporation Taxes Act 1970 section 488 subsec-or-para (8)Income and Corporation Taxes Act 1970, sec. 488(8); Income and Corporation Taxes Act 1970 section 489 subsec-or-para (13)489(13).
This was an appeal by the taxpayer from the decision of the Special Commissioners upholding four assessments for the period 1976-77 to 1979-80.
In March 1974, two Guernsey companies controlled by the taxpayer and his family sold two parcels of land to another company which was similarly controlled. Assessments were made on the taxpayer under Income and Corporation Taxes Act 1970 section 488sec. 488 of the Income and Corporation Taxes Act 1970, on the basis that he had provided the opportunity of realising the gains. The matter in issue was the basis on which the gains should be valued as the contracts for sale provided that £655,000 of the purchase price of £700,000 would be deposited with a third party. Those amounts deposited were to be repaid to the Guernsey companies in instalments over six years, provided that the land was not nationalised or compulsorily acquired during that period. The agreements further provided that, if the purchaser commenced building operations on the land, the parties would then come to an agreement as to how much of the deposited money should be released to the Guernsey companies. In the event that agreement could not be reached, provision was made for an arbitrator to determine the amount which should be released.
The case initially came before the courts in relation to the amount to be assessed for the 1973-74 year (the year of sale). The assessment for that year was made on the basis that the total sale price of £700,000 was subject to tax. The assessment on that basis was upheld by the General Commissioners and by Templeman J. in the High Court. The Court of Appeal, however, remitted the case to the Commissioners for a determination that the taxpayer was caught by Income and Corporation Taxes Act 1970 section 488 subsec-or-para (8)sec. 488(8) and to adduce evidence of valuation of the gain. The House of Lords subsequently held that the remit to the Commissioners was totally improper and held that only the sums released in the year should have been subject to tax in that year.
This case concerned subsequent periods in which the amounts deposited were released. The Special Commissioners confirmed the assessments made on the basis of the released amounts and the taxpayer appealed contending that, as the House of Lords had not said that the remit of the case by the Court of Appeal would have been totally otiose, the rights of the vendor companies under the contracts were capable of being valued in the year the contracts were entered into or within a year thereafter. Accordingly, it was argued that no assessments made in respect of periods after those years could lie. Expert witnesses were called to establish a value for the rights under the contracts. It was submitted that the rights under the contracts constituted money's worth within the definition of "capital amount" in Income and Corporation Taxes Act 1970 section 489 subsec-or-para (13)sec. 489(13) of the Income and Corporation Taxes Act 1970 and that the gains could be taxed only in the year in which they had been realised, namely 1973-74.
Held, appeal dismissed.
1. The House of Lords, in the earlier case, found that the gain was to be calculated on the receipt in the tax year in question. They laid down that, as a matter of principle, the correct basis of assessment was upon the instalment of the purchase price which was released to the vendor in the relevant year of assessment.
2. The sales of the land by the Guernsey companies were sales for money and not for money's worth, although there were restrictions on the receipt of the moneys.
3. The proper method of assessment to tax was that accepted by the House of Lords and adopted by the Revenue in this case, namely assessment based on receipt of the instalments of the purchase prices.
1. On 13, 14, 15 and 16 July 1981 we heard appeals by Cecil Mortley Yuill against assessments to income tax under Sch. D, Case VI for four years of assessment as follows:
1976/77 : £307,256
1977/78 : £335,000
1978/79 : £335,000
1979/80 : £115,000
2. At the close of the hearing we reserved our decision and gave it in writing on 12 December 1981. A copy of that decision is annexed to and forms part of this case.
3. The four assessments under appeal in the present case were made upon the same facts as the assessment for the year 1973/74 which was the subject of the litigation in Yuill v. Wilson (H.M.I.T.) WLRWLR[1979] 1 W.L.R. 987 and, in the House of Lords, [1980] 1 W.L.R. 910. Broadly stated, the issue in the present appeals was whether, to the extent that the transactions in question were held in the earlier litigation not to have caused gains to be realised in the year 1973/74, gains were realised subsequently, in the years 1976/77 to 1979/80 inclusive.
4. Our decision sets out the facts relevant to the present appeals, the effect of the evidence (which we accepted) of the four expert witnesses called by the taxpayer, the contentions of the parties, our decisions on disputed questions of fact and law and our determination of the appeals.
5. The following documents (or agreed copies thereof) were before us:
(i) a transcript of the proceedings before the General Commissioners for the Division of Hartlepool in Yuill v. Wilson (supra);
(ii) the twenty-one documents listed in para. 5 of the case stated by the said Commissioners;
(iii) the bound record in the proceedings in Yuill v. Wilsonbefore the House of Lords.
(a) The aforementioned documents were consulted by us for the purpose only of ascertaining the issues presented to the General Commissioners and the courts in Yuill v. Wilson, and the manner of their presentation by the parties. Those matters were relevant to the issue of estoppel which was raised by the Crown in the proceedings before us and which is dealt with in our decision.
(i) Agreement dated 23 March 1974 between Ceville Ltd. and C. M. Yuill Ltd.
(ii) Agreement dated 23 March 1974 between Mayville Ltd. and C. M. Yuill Ltd.
(iii) The Labour Party and Liberal Party election manifestos published for the General Election held in February 1974.
(iv) Command Paper 5730 "Land" (September 1974).
(v) Summary consultation document "Community ownership of Development Land" (March 1975).
(vi) Letter dated 17 March 1975 from C. M. Yuill Ltd. to Channel Finance Ltd.
(vii) Extract from the ledger account of C. M. Yuill Ltd.
None of the documents under (a) or (b) above is annexed to this case but they are available for inspection by the court if required. A transcript of the hearing before us is similarly available.
6. The following cases were cited to us in addition to Yuill v. Wilson (supra):
Caffoor v. Income Tax Commissioner (Colombo) ELR[1961] A.C. 584
Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No. 2) ELR[1967] 1 A.C. 853
Slaney v. Kean ELRTAX[1970] Ch. 243, 45 T.C. 415
Reeves v. Evans, Boyce & Northcott Syndicate TAX(1971) 48 T.C. 495
Murphy v. Elders TAX(1973) 49 T.C. 135
Khan v. Edwards ENR[1977] T.R. 143
Yoannou v. Hall UNK[1978] STC 600
Khan v. Golechha International Ltd. WLR[1980] 1 W.L.R. 1482
McIlkenny v. Chief Constable of the West Midlands ELR[1980] Q.B. 283
We were also referred to Res Judicata, Spencer Bower & Turner, 2nd ed., 1969.
7. Immediately on receipt of our decision the taxpayer declared to us his dissatisfaction with the determinations contained in it as being erroneous in point of law and required us to state a case for the opinion of the High Court pursuant to the Taxes Management Act 1970 section 56Taxes Management Act 1970, sec. 56which case we have stated and do sign accordingly.
8. The question of law for the opinion of the court is whether our decision (and accordingly the determinations contained in it) was erroneous in point of law.
1. We have before us in this case appeals by Mr. Cecil Mortley Yuill ("Mr. Yuill") against four assessments to income tax made under theIncome and Corporation Taxes Act 1970 section 488Income and Corporation Taxes Act 1970, sec. 488 as follows:
1976/77 : £307,256
1977/78 : £335,000
1978/79 : £335,000
1979/80 : £115,000
These assessments all arise out of certain transactions which have already been before the courts on Mr. Yuill's appeal against an assessment to tax under Income and Corporation Taxes Act 1970 section 488sec. 488 for the year 1973/74: see Yuill v. Wilson WLRWLR[1979] 1 W.L.R. 987 (Templeman J. and C.A.) and [1980] 1 W.L.R. 910 (H.L.). The litigation on that occasion concluded the issue between the parties as regards the amount assessable for that earlier year of assessment, but the judgments and speeches do not contain clear guidance on the general issue as to how (for the purposes of Income and Corporation Taxes Act 1970 section 488sec. 488) gains should be computed in cases where the receipt of consideration money is deferred (or, as in the present case, deferred and contingent). On that issue, it was indeed decided that in such cases the gain could not be computed by reference to the nominal amount of the consideration money, disregarding the element of deferral or contingency; but the Crown did not...
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